Sales promotion consists of a diverse collection of incentives tools, mostly short-term designed to stimulate quicker and greater purchases of a particular product by consumers.
Where advertising offers a reasons to buy, sales promotion offers an incentive to buy. It refers many kinds of incentives and techniques that are directed towards consumers and traders with the intention to produce primarily immediate or short term sales effects.
Sales promotion is often used in combination with other promotional tools in order to supplement the overall effort. However, it has to be remembered that it is sometimes difficult to terminate or change special promotions without causing adverse effects.
Learn about:- 1. Meaning of Sales Promotion 2. Definition of Sales Promotion 3. Objectives 4. Characteristics 5. Importance 6. Types 7. Tools 8. Role 9. Methods 10. Effectiveness 11. Advantages and Disadvantages.
What is Sales Promotion: Meaning, Definition, Objectives, Characteristics, Importance, Types, Effectiveness and Advantages
What is Sales Promotion – Meaning
Sales promotion involves any paid non-personal marketing communication activity, other than advertising, which offers an incentive to induce a desired result from potential customers, trade intermediaries, or the salesforce. This is sometimes referred to by the term sales incentive. Sales promotion campaigns will add value to the product because the incentives will generally not accompany the product but will typically be offered as mail drops or as coupons to be cut from newspapers, etc.
It is usual for a sales promotion campaign to be used as a temporary offer to the customer in order to stimulate an immediate response. For example, free samples or money-off vouchers and offers are frequently used in sales promotion campaigns for brands or companies which need to improve demand at certain periods.
Included in these campaigns are displays, contests, sweepstakes, coupons, frequent user (loyalty) programmes, prizes, samples, demonstrations, referral gifts and other limited duration selling efforts not included in the other techniques. Most incentives are planned to be offered on a short-term basis only.
Sales promotion is often used in combination with other promotional tools in order to supplement the overall effort. However, it has to be remembered that it is sometimes difficult to terminate or change special promotions without causing adverse effects.
Loyalty programmes are an example of this. A sales promotion (or series of promotions) also has to take account of the likely effect it may have on the image of the brand or outlet due to the negative perception change which may occur because of an association with banal and frivolous promotions.
Example:
In 1999, McDonald’s celebrated its anniversary with a free BigMac promotion. The special offer of buy one get one free, which was advertised extensively in the national press, resulted in a sales promotion offer that was so popular it caused major problems for the company. The food retailer ran out of supplies of BigMac and had to apologise to the public for the shortage. However, there was the extra publicity surrounding the incident which may, or may not, have been beneficial to the company.
To evaluate a sales promotion the retailer should consider:
(i) The cost of the promotion in employee time, as well as for the cost of any merchandise, giveaway items or promotional literature;
(ii) The increase in sales and profit, or improvement in awareness, based upon the campaign;
(iii) Whether the campaign had secondary effects of switching demand from other retailer products;
(iv) Whether there were any additional sales outside of the promotion, due to customers being attracted to the store.
It is not always easy to isolate the above effects from other factors, but it is always important to make some assessment of the benefit of different types of promotion.
Sales promotion offers short-term incentives to encourage purchase or sales of a product or service.
What is Sales Promotion – Definitions Provided by Famous Authors and Institutions
Sales promotion consists of a diverse collection of incentives tools, mostly short-term designed to stimulate quicker and greater purchases of a particular product by consumers. Where advertising offers a reasons to buy, sales promotion offers an incentive to buy. It refers many kinds of incentives and techniques that are directed towards consumers and traders with the intention to produce primarily immediate or short term sales effects.
Sales Promotion – Definitions:
It is difficult to define sales promotion in a precise manner because it includes an extremely wide variety of activities and techniques. There a number of definitions, but not a single definition of sales promotion that is universally accepted by one and all. There is a wide spectrum of views about sales promotion. Some selected definitions by different authorities in this field are presented below with the intention to give an in-depth insight into the meaning and essence of this subject.
According to American Marketing Association, “In a specific sense, sales promotion includes those sales activities that supplement both personal selling and advertising and coordinate them and help to make them effective, such as displays, shows and expositions, demonstrations and other non-recurrent selling efforts not in the ordinary routine.”
As per this definition, one may infer that all those promotional activities which do not fall precisely into personal selling, advertising and publicity categories, should be considered under the head of sales promotion.
According to Philip Kotler, “Sales promotion consists of a diverse collection of incentive tools, mostly short-term, designed to stimulate quicker and/or greater purchase of particular products/services by consumers or the trade.”
According to the Institute of Sales Promotion-UK, “Sales promotion comprises that range of techniques used to attain sales/marketing objectives in a cost-effective manner by adding value to a product or service either to intermediaries or end users normally but not exclusively within a defined time period.”
According to John C Totten and Martin P Block, “The term sales promotion refers to many kinds of selling incentives and techniques intended to produce immediate or short-term sales effects.”
Typical sales promotions include coupons, samples, in-pack premiums, self-liquidating premiums, value-packs, refunds and rebates, price-off packs, contests, sweepstakes, trade show, continuity plans and others. Sales promotion techniques can be applied across a broad range of products, from chewing gum to houses and cars. Perhaps the only unifying theme among these various methods is that they all must be communicated to the appropriate audience to be effective.
In the words of L. K. Johnson, “Sales promotion consists of all those activities whose purpose is to supplement, to coordinate and to make more effective efforts of the sales force, of the advertising department and of the distributors and dealers to increase sales and otherwise stimulate consumers to take greater initiative in buying.”
In the words of George W. Hopkins, “Sales promotion is an organized effort applied to the selling job to secure the greatest effectiveness for advertising and for dealer’s help.”
According to W. J. Stanton, “We define sales promotion as those promotional activities (other than advertising, personal selling and publicity) that are intended to stimulate customers’ demand to improve middlemen’s marketing performance.”
According to Tull and Kahle, “Sales promotion is a short term price, prize, gift or product incentive designed to induce purchase when offered to distributors, industrial users, or consumers.”
What is Sales Promotion – 5 Promotional Objectives: Building Product Awareness, Creating Interest, Providing Information, Stimulating Demand and Reinforcing the Brand
Sales promotion is a tool used to achieve most of the five major promotional objectives:
1. Building Product Awareness:
Several sales promotion techniques are highly effective in exposing customers to products for the first time and can serve as key promotional components in the early stages of new product introduction.
Additionally, as part of the effort to build product awareness, several sales promotion techniques possess the added advantage of capturing customer information at the time of exposure to the promotion. In this way sales promotion can act as an effective customer information gathering tool (i.e., sales lead generation), which can then be used as part of follow-up marketing efforts.
2. Creating Interest:
Marketers find that sales promotions are very effective in creating interest in a product. In fact, creating interest is often considered the most important use of sales promotion. In the retail industry an appealing sales promotions can significantly increase customer traffic to retail outlets.
Internet marketers can use similar approaches to bolster the number of website visitors. Another important way to create interest is to move customers to experience a product. Several sales promotion techniques offer the opportunity for customers to try products for free or at low cost.
3. Providing Information:
Generally sales promotion techniques are designed to move customers to some action and are rarely simply informational in nature. However, some sales promotions do offer customers access to product information. For instance, a promotion may allow customers to try a fee-based online service for free for several days. This free access may include receiving product information via email.
4. Stimulating Demand:
Next to building initial product awareness, the most important use of sales promotion is to build demand by convincing customers to make a purchase. Special promotions, especially those that lower the cost of ownership to the customer, (e.g., price reduction), can be employed to stimulate sales.
5. Reinforcing the Brand:
Once customers have made a purchase, sales promotion can be used to both encourage additional purchasing and also as a reward for purchase loyalty. Many companies, including airlines and retail stores reward good or “preferred” customers with special promotions, such as – email “special deals” and surprise price reductions at the cash register.
The minor objectives of sales promotion are as following:
i. To introduce a new product into a market.
ii. To attract new consumers to buy the product.
iii. To maintain present consumers and to encourage them to buy more.
iv. To encourage dealers and distributors to purchase the product in bulk quantity.
v. To minimize the reduction in sales during the season.
vi. To establish effective co-ordination between advertisement and sales.
vii. To face the competition successfully.
viii. To change the marketing strategies and policies of the enterprise keeping in view the change in the policies and strategies of competitors.
ix. To achieve pre-determined marketing objectives.
x. To provide goods and services of high quality to the consumers at reasonable prices.
What is Sales Promotion – Characteristics: Planned Activity, Universal Activity, Element of Promotion Mix, Non-Media Activity, Strategic Role and a Few Others
The major characteristics of sales promotion are discussed below:
1. Irregular/non-recurring activity – Sales promotion techniques are used in situations when a company is facing a decline in demand, fall in profit, acute competition in the market and during introduction of a new product in the market. Thus, it is not a regular activity, but a non-recurring activity to increase sales in a short time period.
2. Planned activity – A strategic role is shown by the fact that sales promotion can be effective throughout the life of a brand. Sales promotion activities are need to be planned well to stimulate sale. Generally sales promotion is planned as a specific marketing event. It is a ‘stand-alone’ activity which, although incorporated into the marketer’s overall marketing communication strategy, and is planned as a unique event.
3. Universal activity – As it is adopted by all the economies of the world in their sales efforts, it is a universal activity.
4. Element of promotion mix – Sales promotion is one of the significant elements of promotion mix, other than advertising, personal selling, and publicity.
5. Means of marketing communication – It serves as an important means of communication because views and ideas of consumers about the products and services are exchanged with the producers regularly.
6. Non-media activity – It is a non-media activity because sales promotion is differentiated from advertising and publicity, and also includes them as part of the overall promotions mix.
7. Strategic role – Due to the immediate nature of the impact, sales promotion have been thought of as merely, this view is changing, and the strategic role of sales promotion and their integral role in the promotional mix are being known.
8. Acceleration tool – It is designed to enhance the selling process and maximises sales volume. It can be implemented quickly and gets sales results sooner than advertising. Sales promotions offer an incentive to buy now.
9. Versatile – It is versatile for the marketer the techniques of sale promotion are capable of being used with different groups of customers and create different effects on the market. Hence, it is useful in all the stages of a product’s life cycle.
10. Target action – For the three distinct audiences, sales promotion can be targeted. The first is internal and is usually the marketer’s own salespeople. There may, however, be other employees targeted such as technical sales support people or telemarketers. The second audience is the intermediaries in the channel of distribution. And the third is the marketer’s final customers or consumer.
11. Motivation and extra incentive – It includes certain type of incentives that offer a reason to buy. Usually, this incentive is the key element in a promotional program and is an effort by which consumers, traders, and salesforce are motivated towards maximum sales.
12. Action focused – The sales promotion is action focused. While adverting maybe designed to build a brand image and personal selling maybe designed to build long-term relationships, it appears that most sales promotions are designed to elicit a specific action or response from the target audience in the short-term.
What is Sales Promotion – Importance to Consumers, Manufacturers, Dealers and Society and the Nation
Sales promotion is an important component of a promotion campaigning programme. It can be specific tool of the marketing strategy of an enterprise. Because of increasing level of competition and costs of advertisements, products largely use this technique as a promotional tool. Sales promotion techniques are not only useful to the producer and distributors, but also are useful to consumers.
The importance or advantages of sales promotion may be grouped as follows:
1. Importance or Advantages to Consumers
2. Importance or Advantages to manufactures/producers
3. Importance or advantages to dealers/middlemen
4. Importance or advantages to society and the nation.
1. Importance to Consumers:
On the consumers’ point of view, sales promotion methods are beneficial to them in the following ways:
(i) Sufficient product knowledge – Various consumer promotion methods such as demonstration, training to use the product, etc. give sufficient product’s knowledge to consumer with regard to uses, operations, maintenance or upkeep of the product.
(ii) Availability of products at reduced prices – Sales promotional tools like price-off deals, premium offers, discounts, etc. reduce the prices of the product when purchased on notified occasions.
(iii) Increase in consumers buying confidence – Free samples offered under the sales promotion programme give the potential consumers an opportunity to use the goods and satisfy with the quality of the product. This experience may give them confidence to take a better decision towards the purchases of the product.
(iv) Increase in the quantity of goods purchased – Stimulated by the various promotional incentives like free goods, premium and coupons, etc. the buyers are attracted towards larger purchases than their usual needs to avail the opportunity.
(v) Higher standard of living – The consumers also get plenty of opportunities in using the new, cheaper and durable items, to their satisfaction, which may help them to maintain a higher standard of living.
(vi) Minimize exploitation – The consumer promotion programme gives sufficient knowledge about product and substitutes available for a product, its quality and price. As a result, a seller cannot be able to create a monopoly in his product and exploit the consumers. This may be the reason that for products like soaps, detergents, tooth pastes, etc. the exploitation is not at all possible.
2. Importance to Producers/Manufactures:
(i) Increase in sales – Sales promotion programme attracts the consumers and stimulates them for larger purchases, leading to increased sales.
(ii) Improve effectiveness of advertisement and personal selling – The sales promotion makes the advertisement more effective to push the sales. It is effective technique to minimize the dissatisfaction of customers that have been created by retail selling.
(iii) Demand for products and services – The sales promotion techniques have proved successful in introducing new products and services. By the supply of free samples, the new product makes its place in the market.
(iv) Able to capture new market – The sales promotion programme facilitates the producer to capture new markets for his products easily. The markets of plantation products have been successful in capturing the markets by the distribution of free samples.
(v) Regular sales of seasonal products – The offer of off-season discounts, price cuts, etc. on seasonal products like fridge, coolers, fans, etc. are able to maintain regular and continuous sales of such items.
(vi) Increase in goodwill – The repeated uses of sales promotion tools facilitates the consumers to get a special identification of the products as well as of the producer. The satisfactions that have been arrived to the consumers by continuous uses of the products will gradually increase the goodwill of the firm.
(vii) Cooperation from middlemen – The various promotional incentives offered to the dealers help to achieve cooperation from them to sell the products on priority basis and to maintain maximum stock with them.
(viii) Direct control – Since the advertising media is controlled by advertising agencies, the advertising costs are on higher side. This has an adverse effect on the sales and profits. But in the sales promotion programme, the producer has full control over the promotional tools and therefore, can achieve maximum results at minimum costs.
(ix) Improvement and new uses of the product – The sales promotion programme invites suggestions from the consumers from time to time to know about their change in needs and preferences. Accordingly, necessary improvement or modifications are made in the product to satisfy the consumer needs.
(x) Effective steps to face the competition – Larger sales, reduced production costs, increase in profits, special identify and goodwill of the producer, etc. achieved through sales promotion measures can help to face the competition more effectively.
3. Importance to Dealers/Middlemen:
(i) Facilitates larger sales – The dealers get advantages of sales promotional techniques for increasing their sales. Sales promotion is a coordinating activity between sales, advertising, research and public relations efforts and they reduce the resistance at the point of sales.
(ii) More facilities and assistance – The producer, under the sales promotional programme, provides various facilities and assistance to the middlemen, such as assistance to marketing research, providing with display materials and managerial assistance, etc. for maintaining regular stock for sales.
(iii) Direct relation with customers – A direct relationship between the dealers and the customers are established through the sales promotion techniques which will continue for a long time.
4. Importance to the Society and the Nation:
The importance of sales promotion programme for the society and the nation can be summarized as below:
(i) Increase in standard of living of the people.
(ii) Increase in employment opportunities.
(iii) Development and expansion of transport, communication, banning, insurance and warehousing facilities.
(iv) Increase in Gross National Product and per capita income.
(v) Creation of healthy competition in national and international trade, etc.
What is Sales Promotion – 2 Types: Consumer-Sales Promotion and Dealer-Sales Promotion
There are two kinds of Sales Promotion:
(a) Activities-intended to educate or inform the consumers and those intended to stimulate the consumers. These are called consumer sales promotion,
(b) Activities to increase the interest and enthusiasm of dealers and distributors. These are called dealer/distributor sales promotion devices.
1. Consumer Sales Promotion:
These devices are:
(a) Sampling, usually called consumer sampling. Free samples are given to consumers to introduce a new product or to expand the market. The consumers can try the product.
(b) Demonstrations or instructions educating the consumers in the manner of using the product.
(c) A coupon is a certificate that reduce price. When a buyer gives a coupon to the dealer, he gets the product at a lower price (Regular price is Rs. 10; with a coupon it is Rs.8. Coupons (same as money) are accepted as cash by retailers.
(d) Money-refund orders, i.e., full purchase price is refunded, helping the introduction of a new product. Refund offer creates additional interest and increases sales considerably. It is a good device for creating new user and to strengthen the brand loyalty.
(e) Premium offers are temporary price reductions which appeal to bargaining instinct, e.g., instant coffee sold by one company was very successful. Towels, dinnerware, hair-brushes, key chains, artificial flowers, ball pens, toilet soaps, blades, were given as in-pack premiums. Attractive reusable jars costing separately Rs.4 may be given at an extra charge of Rs.2 only. Liril gave a soap box almost free with two toilet soaps.
(f) Price-off, e.g., Re.1 off on a Brooke Bond pack of 500 grams; the price-off label is printed on the package. It gives a temporary discount to the consumers.
(g) Fashion shows and parades are good promotion aids or helps in men’s and women’s sophisticated clothing’s.
(h) Contests or sweepstakes for consumers help to stimulate consumer interest in the product. In these contests, participants compete for prizes on the basis of their skill or creative ideas. In sweepstakes, they submit their names to be included in a drawing of prize winners. This type of sales promotion is not a lottery because there is chance or luck, prizes are offered and a payment to participate is there.
(i) Trading stamps cure given for purchasing in a particular shop.
2. Dealer’s Sales Promotion:
These devices or helps are:
(a) There is a provision of free display material either at the point of purchase (POP) or point of sale (POS), depending on one’s viewpoint. Display reaches consumers when they are buying and actually spending their money.
(b) Retail demonstrators are supplied by manufacturers for preparing and distributing the product as a retail sample, e.g., Nescafe instant coffee to consumers for trying the sample on the spot or demonstration regarding the method of using the product.
(c) Trade deals are offered to encourage retailers to give additional selling support to the product, e.g., toothpaste sold with 30% to 40% margin.
(d) Seller gives buying allowance of a certain amount of money for a product bought.
(e) Buyback allowance is given to encourage repurchase of a product immediately after another trade deal. A buy-back is a resale opportunity.
(f) Seller gives free goods, e.g., one free with 11, or 2 free with 10 are common free deals.
(g) Advertising and display allowance may be given.
(h) Sales contests for salesmen are held.
(i) Deader loader (a gift for an order) is a premium given to the retailer for buying certain quantities of goods or premium for special display done by a retailer.
(j) Dealer and distributor training for salesmen, which may be provided to give them a better knowledge of a product and how to use it.
Dealer sales promotion provides selling the selling devices. Sales promotion devices at the point of purchase inform, remind, and stimulate buyers to purchase products. People who see these devices are in a buying mood and thus they can be easily persuaded to buy those products.
Tell tags are informative labels affixed on the product, describing in detail the features of the product and its unique selling points. Shelf talkers are similar labels attached to the shelves close to product displays. Counter top racks, posters, mechanised signs are other point-of-purchase displays.
Each form of sales promotion is used to encourage quick movement of products along the channel of distribution and enhancing the tempo of sales campaign. It also creates extra incentive or gives extra value to the channel of distribution itself, e.g., retailers. Hence, sales promotion offers a direct inducement which gives an extra value or incentive to the distributors, their sales force and the ultimate consumer.
What is Sales Promotion – 2 Important Tools: Primary Consumer Promotion Tools and Trade Promotion Tools
The primary consumer promotion tools are:
a. Samples – offer consumers a trial amount of a product or service.
b. Coupons – certificates that give buyers a savings when they purchase a specified product.
c. Cash refund offers (rebates) – offers to refund part of the purchase price of a product to consumers who send a proof of purchase to the manufacturer.
d. Price packs (cents-off deals) – reduced prices that are marked by the producer directly on the label or package. Quite a common feature used to promote FMCG sales.
e. Premiums – goods offered either free or at low cost as an incentive to buy a product.
f. Advertising specialities – useful articles imprinted with an advertiser’s name that are given as gifts to consumers, e.g., Key chains, diaries, Wallets, etc.
g. Patronage rewards – cash or other rewards for the regular use of a certain company’s products or services, e.g., ‘Frequent fliers’ benefits given by airlines.
h. Point-of-purchase (POP) promotions – displays and demonstrations that take place at the point of purchase or sale.
i. Contests, sweepstakes, and games – promotional events that give consumers the chance to win something (such as cash, trips, or goods) by luck or through extra effort.
Trade-promotional tools include:
a. Discount – a straight reduction in price on purchases during a stated period of time.
b. Allowance – promotional money paid by manufacturers to retailers who agree to feature the manufacturer’s products in some way.
Other forms include free goods, push money, and speciality advertising items.
What is Sales Promotion – Top 16 Roles of Sales Promotion
Sales promotion roles are derived from broader promotion roles and objectives which are derived from more basic marketing objectives developed for the product. The specific roles set for sales promotion will vary with the type of target market.
Sales promotion role for consumer includes encouraging for large scale purchase, building trial among non-users, and attracting switchers away from competitors’ brands.
Sales promotion role for retailers includes inducing retailers to carry new items and higher levels of inventory, encouraging off-season buying, encouraging stocking of related items, offsetting competitive promotions, building brand loyalty of retailers, and gaining entry into new retail outlets.
For sales force, sales promotion role includes encouraging support of a new product or model, encouraging more prospecting, and stimulating off season sales.
In addition to these specific roles, there are certain general roles of sales promotion, which are stated as below:
1. To popularize goods and services of the producer among the potential consumers and to motivate them towards larger purchase.
2. To motivate the existing customers for maximum purchases.
3. To activate the dealers towards larger purchases and maintain regular stock of the seller’s products.
4. To simplify the efforts of sales force and motivate them for getting larger sales orders.
5. To make the advertising more effective and to facilitate coordination between personal selling and advertisement.
6. To facilitate for maximum sales on special occasions such as, new-year-eve, religious festivals and other such occasions.
7. To promote larger sales in certain market or specified segments of the market.
8. To face the competition effectively.
9. To find a suitable market for a new product to be introduced in the market.
10. To prove the product better in quality and uses, than of the similar product of the competitors.
11. To present a counter promotional programme against the competitors.
12. To educate the customers/dealers and salesmen about to promotional techniques.
13. To develop patronage habits among the customers.
14. To facilitate the market research study on consumer psychology, motives, changer in demands, etc.
15. To maintain the sales upto the normal level even during seasonal variations and during the declining stage of the products life cycle.
16. To increase the goodwill of the firm.
What is Sales Promotion – 3 Main Methods: Personal Selling, Advertising and Mass Promotion, Advertising, Publicity and Sales Promotion (APSP)
Method # 1. Personal Selling or Salesmanship:
Sales are the life-blood of a business. The ultimate object of all production is sale; and without sales, no business would survive. Sales are also the major source of revenue to a business and everything else is expense. Industrial Revolution has brought in its wake a new development—production preceding demand.
Now businessmen do not produce only for a well-established market but also for markets which are yet to be cultivated. Also, there is keen competition between different producers for the same market. Every producer tries to outsell his rival. He has to create satisfied customer for his products.
This needs salesmanship of the most efficient order. The story of success of most of the prosperous business houses is, at least partly, a story of successful salesmanship. Hindustan Unilever, Bata Shoe Co., Delhi Cloth Mills in India all owe their present position in part to the efficient selling techniques they employ.
Though the basic objective of salesmanship continues to be the negotiation of a sale, the emphasis on the means to achieve the end has considerably changed over time. Now salesmanship is not “an attempt to induce people to buy goods” as one author puts it, but it is “the art of presenting an offering that the prospect appreciates the need for it and that a mutually satisfactory sale follows.”
The stress is on mutual satisfaction and not on the satisfaction of the seller alone as used to be the case earlier. According to W. Major Scott., “It is part of a salesman’s business to create demand by demonstrating that the need does exist, although before his visit there was no consciousness of that need.”
G. Blake says that, “salesmanship consists of winning the buyer’s confidence for the seller’s house and goods thereby winning a regular and permanent customer.” The stress here is on winning permanent goodwill and not the present sale alone. Paul W. Ivey, on the other hand, defines salesmanship as – “the art of persuading people to purchase goods which will give off lasting satisfactions.”
Aggressive salesmanship, i.e., selling of goods by pressurising the customers or by playing on their nerves, pays only in the very short run. Since selling is a continuous job and repeat orders are of essence for success, abandonment of these tactics is in the interest of the organisation itself.
The businessman, today, is singularly aware of this, and pressure salesmen are universally recognised as a nuisance. Today, the emphasis is on service and the modern concept of salesmanship asserts it in unmistakable terms. Help the customer get the most for his money; Serve when you sell; Put yourself in your customer’s place and give the service that you would expect; Always advise a customer for his own best interest—are the watchwords of all the sales managers today.
Method # 2. Advertising and Mass Promotion:
The modern age is the era of competition, and it has already been observed how competition in the market makes it absolutely necessary for manufacturers to think of new and unfamiliar uses for their products or to find out new buyers for their products. Demand creation is, therefore, almost as important as meeting the existing demands.
Both demand creation and catering to the existing demand require some means by which consumers— existing as well as potential—are informed about the availability of the product. Of the various means and devices employed to perform this essential function, advertising is easily the most outstanding and the most far-reaching approach.
To the layman, advertising is nothing more than the “use of bright ideas, stunts and slogans to popularise goods which appeal to the great body of ordinary consumers.” But in believing so the layman is not merely missing the importance of advertising in the modern world, but is also confusing it with mere propaganda.
Propaganda is employed to spread some ideology or doctrine. As against this, advertising should be looked upon as a purely commercial function which is an integral part of the marketing process.
The late President Roosevelt of the U.S.A., gave a very apt description of modern advertising. In his words, “It brings to the greatest number of people actual knowledge concerning useful things- it is essentially a form of education—and the progress of civilization depends on education.”
In this sense, advertising began with some kind of a personal approach to the consumers. This personal approach assumed many forms. Some firms would send their travelling salesmen round to canvass for their products from door to door. Shop windows were tastefully and attractively decorated so that the products could catch the eye (and the heart) of the customers who happened to pass by.
A businessman would write to those consumers who are known to him or else would ring up to inform them that a certain product in which they would possibly be interested is available. All these efforts of the producers or sellers were directed towards informing the possible customers about their products or services.
Underlying all of them was the desire to promote sales. But they could achieve their objectives within certain limitations. A travelling salesman can call on a limited number of consumers or retail shops. Not many people may really care to notice the goods on display in show windows.
The businessman may know a small number of persons whom he may contact personally to pass on information concerning his products. Thus sales may be promoted on a rather small scale by such means. It need hardly be pointed out that these techniques of sales promotion do not fully meet the requirements of the mass production industries of the modern times.
When goods are produced on a mass scale, their sales can be effectively promoted only by those means which can be used to inform the largest possible number of possible consumers about certain goods which can meet certain requirements of theirs. In the modern sense, therefore, advertising has to be understood as a mass selling technique.
Prof. Albert Fray defines advertising as the preparation of visual and oral messages and their dissemination through paid media for the purpose of making people aware of and favourably inclined towards a product, brand service, institution, idea, or point of view.
The older devices of window-dressing, personal salesmanship and personal calls can serve the purpose of small business only, though even there they may be used to supplement advertising rather than to supplant or replace it. The needs of the growing number of large- sized concerns established to cater to national and international markets can be met only by the technique of advertising through various media of mass appeal and mass communication.
In its essence, therefore, modern advertising is the extension of personal salesmanship from that which is directed to an individual or a small audience of individuals to that which is directed to reach hundreds of thousands of people over a network of media.
Method # 3. Advertising, Publicity and Sales Promotion (APSP):
What is advertising? What is publicity? What is sales promotion? What kind of expenditure would come under these heads? Why do hardheaded businessmen spend money on APSP?
Advertising is non-personal communication. It is communication that is paid for. The sponsor is usually identified. He is conveying news or promoting ideas, goods or services to a specific group of people. He buys space or time in media which would reach them. He may resort to advertising with any or all of the following in mind – speed, economy, impact, and convenience.
Advertising is one channel of information for consumers. They get to know about new products, product improvements, price changes, packaging innovations, special credit terms, new uses for the product and so on from the advertising columns.
“Publicity”, in its restricted sense, is communication favourable to a company in the editorial part of media, be it press, radio, film or TV. Publicity is not paid for though the message that are printed or broadcast may have been inspired by the company concerned.
This may be done through press conferences, which do cost money—invitation cards, telephone calls, tea or more elaborate fare for journalists, hire of hall where the conference is held, an information kit for the invitees and so on. Sometimes transport is hired to take a party of journalists to a function or a plant.
Special interviews and press releases (with or without supporting brochures) are other methods adopted. Often photographs are taken for pictorial coverage in media, and these also cost money. Since the messages appear to emanate from the editor— who is regarded as an objective person unlike the sponsor of an advertisement—they command mare credibility with the reader or the viewer or listener.
But publicity messages are controlled Joy the editorial staff. These people—not the advertiser — will decide when the messages will appear, how much space or time will be devoted to them, and how they will be presented. Editors will seldom repeat the same story. Advertising, on the other hand, is controlled by the advertiser.
He decides how long the message should be, and when it should appear or be broadcast. He can repeat a message as many times as he wants, in the same format or in different formats.
“Sales promotion” would cover three groups – salesmen, dealers and consumers. Training of salesman (in the case of technical salesman—as in the case of pharmaceuticals or engineering goods—this can be expensive and time-consuming), conferences of salesmen, salesmen’s kits, prizes for the best performers and so on are meant to cover the first group.
Their morale and enthusiasm are of immense value to a company. Some companies make the annual conference of salesmen something of a gala affair, and often wives are invited. Sales promotion among dealers takes a variety of forms.
Trade letters, house journals for the trade literature on products, displays and competitions, “mystery customer”, schemes, painting of sign-boards, gifts like diaries, demonstrations, film shows, parties and conventions are some of these. In India dealers can influence the choice of a brand by a consumer to a very great extent, and a brand which enjoys what is known among jargon-mongers as – “dealer push” will be very difficult to displace.
What is Sales Promotion – Effectiveness of Sales Promotion on Sales
How Promotions Influence Sales?
It is interesting to explore how sales promotions influence sales.
Four basic mechanisms are involved in this process:
1. Brand switching – The objective of some sales promotions is to induce brand switching which means encouraging consumers to purchase the promoted brand instead of the regular brand that would have been purchased had there been no sales promotion.
2. Repeat buying – Sales promotions influence the consumers in a manner that increases the chances of purchasing the same brand again in future.
3. Purchasing more, or accelerating timing – Consumers purchase more quantity than their immediate requirements, or the purchase timings are changed.
4. Increasing category expansion and consumption – The consumers increase consumption of total product category as a result of sales promotion.
A brief description of these mechanisms is as follows:
1. Brand Switching:
Some promotions encourage consumers to buy a different brand than the one they bought on an earlier purchase occasion, or had the intention of buying now. Brand switching of this type is often called as ‘aggressive switching.’ The second type of promotion effect on brand switching is considered as ‘defensive switching.’ In this case, the objective is to retain the customer by encouraging her/him to buy the same brand as was bought on earlier occasion instead of switching to a different brand on this purchase occasion.
The manufacturers’ concern is to compete with other similar brands, while the concern of the re-seller is to encourage customers to buy from her/his store (not especially the manufacturers’ brand). When a retailer promotes, consumers respond by switching stores, that is, they purchase from the store that is promoting instead of the regular store. This store switching would not have happened had the retailer not offered a promotion. It is clear that from the retailer’s point of view, store switching is more important than brand switching.
Brand switching is basically influenced by:
(i) Sensitivity towards Price:
Promotions offering price deals influence the attitudes of consumers towards buying the brand. Much would depend on the size of the discount and the consumers’ sensitivity towards price and how much importance consumers place on price as compared to quality.
If the attitude towards the brand has been quite low as compared to some other brands, then a price promotion is likely to encourage a switch to the promoted brand. Such price promotions may also encourage consumers to buy an otherwise expensive brand, which they could not afford on the normal list price.
(ii) Displays at the Point of Purchase:
Displays at the point of purchase may induce brand switching because they serve as ‘conditioned’ stimuli associated with price promotions (classical conditioning theory). Over a period of time, consumers learn, or get trained, to associate displays with price reductions and respond even when the price reduction is not there.
(iii) High and Low Involvement Decision of Customer:
Both, high and low involvement decision, situations provide some explanation. A display shows a low priced, low-involvement product and the consumer buys it because it is convenient. In high-involvement situations, the consumers’ search activity may lead to some other brand, which was displayed and led to purchase.
An example would illustrate the point. A customer goes to the market with the intention of buying a Philips colour television. In the dealer’s showroom, Thompson brand is displayed prominently and the customer asks the dealer to switch the set on. What the customer sees impress her/him and the customer buys it.
(iv) Price Perception:
Consumer’s price perception may also have a significant effect on brand switching. For example, say the consumer has a coupon of some value for a certain brand but, on reaching the store, he sees the sign ‘sale’ for another brand. For this brand on sale, the consumer has only a slight preference.
The extent of price reduction on this brand with slight preference would be influenced by the customer’s perceived reference price of that brand. If the disparity is high then the consumer is likely to buy the brand for which she/he has the coupon.
Consumers do not completely accept the suggested reference prices and at times they are suspicious of ‘sale’ signs. If the amount of price reduction is equal, then consumers prefer to use the coupon in switching the brand compared to in-store price reduction. That is, the coupons are more effective in inducing brand switching. There is another aspect to coupons. Consumers having a coupon find themselves in a controlling position, with a sense of pride in using the coupon.
If most of the consumers are inclined towards low prices because of economic conditions, the majority of them are assumed to be buying low priced brands. However, if the price on an expensive item is reduced because of promotions, then some consumers from low quality category will switch to the promoted brand.
But when the low quality product is promoted, there is no switching because the consumers have been buying the brand without promotion. The consumers from high-income group are unlikely to switch to a low priced brand because of promotion and the sales gains would not be there.
2. Repeat Buying:
When a consumer buys a product on promotion, it may lead to developing a habit of purchasing that brand and also some evaluation about the performance of the brand. It may also happen that since the brand is purchased on promotion the consumer’s attitude towards the brand weakens and the probability of purchase in future declines. Repeat purchase may result because of habit formation that may develop because the brand is bought more than once due to sales promotion.
Much depends on the satisfaction of the consumer with the brand purchased on promotion. For example, if a customer purchased Godrej refrigerator on promotion and was satisfied, it is very likely that the next time; when the need arises, he would purchase the same band again on promotion occasion, or other products of the same manufacturer when available on promotion.
The repeat buying is influenced by:
(i) The Nature of Reward:
Instrumental conditioning views sales promotions as rewards and consumer learns to continue buying the product. However, the nature of reward may have significant effect on behaviour reinforcement. The reward should be strong enough to encourage and reinforce the purchase behaviour to sustain it.
(ii) Habit Formation:
Repeat purchasing is often the result of habit formation and learning. Sales promotions stimulate the consumers to buy a product and this becomes the first step towards establishing a habit. Another way is to not allow the brand user to shift to some other brand by rewarding and reinforcing the already established behaviour.
In case of low-involvement products, the role of habit is more important. The consumer does not want to devote much time to thinking and pre-purchase evaluation in making a purchase decision. Habit helps the customer avoid any cognitive effort and helps as a simple and convenient way to decide which brand to purchase.
In case of high involvement products, it is assumed that learning takes place when the consumer experiences the actual performance of the product and makes an evaluation. A favourable evaluation is likely to help sustain the habit. In some cases, even consumers with low-involvement often make evaluations that may have repercussions with regard to developing the habit.
3. Purchasing More, or Accelerating Timing of Purchase:
Purchasing more and accelerating timing refers to those situations when consumers buy more than their immediate requirement or shift their purchase timing as a result of promotions.
When re-sellers buy more than their normal requirements, it is called ‘forward buying.’ Building excessive inventories in this manner often lead to stock diversion in non-deal areas. Another important repercussion of this purchase behaviour is that it merely shifts the purchases, which would have occurred anyway.
For example, if a consumer buys more than the immediate requirements, then in the next purchase period this consumer either would not buy or buy less. In another situation, due to promotion, the consumer buys the item now, though the intention was to buy it after two months say a refrigerator. This is purchase acceleration.
The reverse situation may also be happened in certain situations, that is, negative acceleration when consumers buy less or decide to purchase later rather than now. This may happen when the sales promotion stimulates brand switching. The consumer wants to try the product and buys a smaller quantity to reduce the risk associated with using something new. The consumer may also postpone the purchase of a product because she/he learns from some source about the forthcoming sales promotion, or anticipates it.
4. Increasing Category Expansion and Consumption:
Such situations can be created by:
(i) Creating New Occasions for Purchase:
Sales promotions are likely to stimulate demand by creating new occasions for purchase, or by increasing the consumption rate by consumers. In certain situations the purchase of a product category gets accelerated.
(ii) Displays of Products:
Sales promotions, such as displays, can create new purchase occasions by remaining the customer that the displayed product is good for growing children (such as protein biscuits). Other products, for example, noodles or potato chips, purchased on promotion in multiple units, can increase the consumption rate, which is often the objective of many promotions. One example can be of condensed milk, ‘Milkmaid.’
An attractive display of this brand is arranged and a free recipe book is given on purchase of two packs. This is quite likely to increase the rate of consumption of this product, as consumers will be tempted to try different recipes.
(iii) Serves the Product as Gift Items:
In case of many high involvement products, promotions can help consumers to realize that a certain product would serve as a good gift item (a silk sari, camera, Ray ban sunglasses, etc.). In some cases, there is a certain price limit beyond which the customer would not buy a product.
(iv) Interest Free Installments:
Once a price promotion offer lowers the price of the product below the customer’s price limit, a purchase occasion is created. Many customers buy autos when available on promotion such as interest free installments, which otherwise they are not in a position to buy on down payment. Of late, this is happening in case of almost all expensive household items and living accommodations made available by builders.
Close observation of the market place point to the likelihood that brand switching, repeat purchasing, purchase acceleration and consumption, all occur simultaneously. The net result, however, is that sales promotions work.
What is Sales Promotion – Advantages and Disadvantages of Sales Promotion
Advantages of Sales Promotion:
Sales promotion has several advantages.
Some of them are listed below:
i. Eye-catching appeal – Sales promotions, being incentive-based, have an eye-catching appeal, and attract the attention of the audience, who would often have not noticed the product in a cluttered environment.
ii. Themes and tools can be distinctive – Sales promotion can be done with specific themes like festive themes, and the tools used can also be distinct to the purpose.
iii. It helps draw customer traffic and retain loyalty to the organisation – Sales promotion, by nature, incentivises customers and as such, provides new customers with a reason to buy the product, and existing customers to continue with their loyalty to the product.
iv. Impulse purchases are increased – Sales promotion may help to increase impulse purchases. Generally, if the promotional offer is tempting, the customer may go ahead and buy the product, even though he has not planned the purchase in the first place.
v. Customers can have fun with contests and demonstrations – Often sales promotions are conducted through exciting contests and demonstrations. This leads to a lot of fun for the customers.
Disadvantages of Sales Promotion:
i. It may be difficult to terminate certain promotions without adverse customer reactions – Often customers get accustomed to sales promotions activities and start expecting the same during every purchase. In such a situation, it becomes difficult to terminate the promotion.
ii. Retailers’ image can get hurt if the right kind of promotion is not used – Sales promotion has to be very carefully planned and meticulously executed. Besides, the promotion tools used must be in line with the organisation’s overall objectives and goals. If this does not happen, it can end up hurting the image of the organisation.
iii. Most sales promotions have only short-term effects – Sales promotions are supposed to be run for a short period of time. As a result, the effect is not long lasting.